Far from the trading floors where gold rises and falls by the hour, the Bank of Korea has quietly done what central banks have always done when they believe in a long horizon: it has added to its position in the metal, buying more of the SPDR Gold Trust in the third quarter even as the price stumbled. The filing, sent to American regulators, tells a story of patience meeting a moving market, where a larger stake is worth more on paper yet has lost ground since late summer. The bank insists its course is unchanged, a slow building of gold exposure meant to serve the nation's reserves over years
Bank of Korea Lifts Gold ETF Stake 40.8%, but Price Slump Erases Roughly $24 Million in Value
$24.29 million vanished from price declines alone
Mark
The headline says the bank lost $24 million. Is that a real loss?
Mimi
It's a mark-to-market estimate. GLD fell 6.7% from its September 30 value to $355.45 on the 13th, and applied to 956,869 shares that comes to about $24.29 million.
Luke
And it assumes the bank still holds exactly those shares. The filing is a snapshot of the end of September. We don't know what happened after that.
Mark
So is the bank actually underwater?
Mimi
That's the thing. The filing doesn't give purchase cost, so profit or loss against what they paid can't be judged.
Luke
Right. Part of the position was bought when prices were lower, so the headline figure shouldn't be read as a realized loss.
Mark
Does the bank seem worried?
Mimi
Team head Lee Chang-heon says the plan is proceeding as originally set. Gold is down 16.6% from its August 25 peak, and the stated aim is to keep building exposure over the medium to long term.
Luke
But the target weighting and timeline aren't public. "On plan" is hard to verify without them.
Mark
Why does the physical gold plan matter?
Mimi
ETFs are securities, so they don't change the gold line in reserve statistics. Buying Korean-produced gold would.
Luke
Though that depends on regulations expected to be done only after mid-December. Talk of purchases starting next month is what some observers expect, not an announced date.
El Pulso
- The central bank raised its gold ETF stake 40.8% in the third quarter, just as prices began sliding.
- GLD fell about 6.7% by November 13, erasing an estimated $24 million in value from the position.
- Gold is down roughly 16.6% from its August peak, testing the bank's conviction that the buying is sound.
- The bank is shifting weight toward gold and U.S. large-cap stocks while trimming developed-market equities.
- A planned purchase of domestically produced gold for export could begin as early as after mid-December, potentially changing reserve statistics.
Far from the trading floors where gold rises and falls by the hour, the Bank of Korea has quietly done what central banks have always done when they believe in a long horizon: it has added to its position in the metal, buying more of the SPDR Gold Trust in the third quarter even as the price stumbled. The filing, sent to American regulators, tells a story of patience meeting a moving market, where a larger stake is worth more on paper yet has lost ground since late summer. The bank insists its course is unchanged, a slow building of gold exposure meant to serve the nation's reserves over years rather than weeks. Whether that patience is rewarded is a question the next few months will begin to answer.
On the 15th, the Bank of Korea's third-quarter filing with the U.S. Securities and Exchange Commission revealed that the central bank now holds 956,869 shares of the SPDR Gold Trust, a 40.8% increase over the end of June. At the end of September, that position was worth about $364 million, up 45.5% in value from the previous quarter.
The timing is awkward. By the 13th of this month, GLD had fallen 6.7% from its end-of-September level, which would mean roughly $24 million in lost value if the holdings had stayed flat. The filing does not reveal what the bank paid, so the true gain or loss against cost cannot be known from the disclosure. International gold, which peaked in late August, now sits about 16.6% below that high.
The bank says the plan has not changed. A team head, Lee Chang-heon, said the institution is buying appropriate amounts at appropriate times toward a target weighting for gold-related assets this year, aiming to raise exposure steadily over the medium to long term. The target and timeline were not disclosed, and the goal covers all gold exposure, including physical gold, so the bank can pick vehicles as conditions require.
The ETF purchases mark a shift. After buying 20 tons of physical gold in 2013, the bank stayed cautious for years under principles inherited from earlier leadership. It resumed investing this year after Governor Shin Hyun-song took office. Because ETFs are securities, they do not appear in the physical gold figures of reserve statistics.
Physical buying is being prepared separately. In August the bank announced plans to purchase gold that domestic producers intend to export, at international prices, through a cooperative framework involving the Korea Exchange and the Korea Securities Depository. Rules and preparations are expected to be largely complete after mid-December, and some expect purchases to start as early as next month. Analysts read the strategy as diversification rather than short-term profit, and they expect future buying to proceed cautiously while gold remains volatile.
On the 15th, the Bank of Korea's third-quarter securities filing landed with the U.S. Securities and Exchange Commission, and it showed the central bank holding 956,869 shares of the SPDR Gold Trust (GLD) at the end of September. That was 277,104 shares, or 40.8%, more than the 679,765 it held at the end of June. The value of the position climbed 45.5%, from $250.41 million to $364.41 million, an increase of $114 million.
The timing is awkward. GLD closed at $355.45 in U.S. trading on the 13th of this month, 6.7% below its end-of-September value of $380.84 per share. If the bank's holdings were unchanged since September, the position would now be worth about $340.12 million. That implies $24.29 million, roughly 32 billion won, lost to price declines alone. The filing does not reveal what the bank actually paid, so whether the position is up or down against its purchase cost cannot be told from the disclosure.
The price path was not a straight slide. GLD stood at $368.38 at the end of the second quarter and gained 3.4% by the end of the third before turning down. International gold peaked at $4,658.59 an ounce at the August 25 close and was at $3,884.77 on the 13th, 16.6% below that high.
The bank says the plan has not changed. Lee Chang-heon, a team head at the BOK, said the bank set a target weighting for expanding gold-related assets this year and is buying appropriate amounts at appropriate times, adding that the program is going well according to the original plan. He said the underlying idea is to raise gold exposure steadily over the medium to long term. The target weighting and the timeline for reaching it have not been disclosed. The target also applies to total gold exposure, covering physical gold and gold-related financial products, rather than to ETFs on their own, so the bank can choose vehicles according to market conditions and operational needs.
Across the four ETFs the BOK reported to the SEC, combined value reached $4.35935 billion, up 12.2% from the prior quarter. GLD's share of that total rose from 6.44% to 8.36%, a gain of 1.92 percentage points. The same filing shows movement in equities. Holdings of the iShares Core S&P 500 ETF rose 17.6%, from 1,752,811 to 2,060,681 shares, and the Vanguard S&P 500 ETF rose 14.5%, from 1,923,442 to 2,203,142 shares. The iShares Core MSCI International Developed Markets ETF, which holds developed-market stocks outside the U.S., fell 13.4%, from 11,259,397 to 9,752,666 shares. The bank shifted weight toward gold and U.S. large-cap stocks and away from non-U.S. developed-market equities.
The ETF purchases follow a change of course. After buying 20 tons of physical gold in 2013, the BOK stayed cautious on gold for years, in line with conservative principles kept since the tenure of former governor Kim Choong-soo. It resumed investing in the second quarter of this year, adding gold ETFs after Shin Hyun-song became governor. Because ETFs count as securities, the increase does not show up in the physical gold figures in foreign exchange reserve statistics.
Physical buying is being prepared separately. In August, the bank announced a plan to purchase, at international market prices, gold that South Korean producers intend to export. It would build a cooperative framework among producers, the Korea Exchange (KRX) and the Korea Securities Depository (KSD), widening purchase channels that have centered on overseas gold markets. Regulations and operational preparations are expected to be largely finished after mid-December, and some observers expect purchases of Korean-made gold to begin as early as next month. If they do, the gold holdings statistics could change.
Market analysts read the buying as an effort to diversify the currency and asset mix of the reserves, not to make short-term profit, and as consistent with a wider trend of central banks raising gold's share. With gold more volatile, they expect the pace and scale of future purchases to stay cautious. The thing to watch is whether domestic gold purchases begin after mid-December.
Citas Notables
The bank set a target weighting for expanding gold-related assets this year and is buying the appropriate amount at the appropriate time; it is proceeding well according to the original plan.— Lee Chang-heon, team head, Bank of Korea
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